IRS Publication 433-B: Collection Information Statement for Businesses
IRS Publication 433-B is the instruction book for Form 433-B — the financial disclosure that every business entity must submit when it owes the IRS and seeks an Offer in Compromise, an installment agreement, or a Currently Not Collectible determination. It is the most consequential form a business taxpayer will ever fill out: it exposes every asset, every income stream, every debt, and every dollar of monthly cash flow to IRS scrutiny. The numbers you report on the 433-B directly determine how much the IRS believes your business can pay — and whether they accept your offer, approve your payment plan, or move to enforced collection. Getting it right, with an experienced professional who understands IRS collection standards and negotiation strategy, is the difference between a resolution your business can survive and a monthly payment that slowly strangles it.
Understanding Form 433-B — What the IRS Wants to Know
Form 433-B is a deep financial excavation of your business. It is not a simple questionnaire — it is a complete financial statement under penalty of perjury. Every section is designed to surface the maximum amount the IRS can collect, and every line item is subject to verification through bank statements, financial records, and third-party reporting. Before you put a single number on this form, understand what each section demands and how the IRS will use it.
Section 1 — Business Information
The form opens with the entity's legal name, EIN, address, phone number, and contact information. It also asks for the type of entity (corporation, partnership, LLC, etc.), the date the business started, and the name and title of the person completing the form. If the business operates under a DBA or trade name, that must be disclosed. The IRS cross-references this against its own records to verify the business exists, is active, and has been properly registered with tax authorities.
Section 2 — Business Personnel
This section asks for the names, titles, and Social Security numbers of all partners, officers, directors, LLC members, and key employees. It also asks for the names and addresses of any shareholders or partners who own more than 20% of the business. The IRS uses this information to identify responsible persons for trust fund taxes (employment taxes and certain excise taxes), to cross-check individual tax compliance, and to determine whether related-party transactions might be reducing the business's apparent ability to pay.
Section 3 — Other Business Financial Information
Here, the IRS asks whether the business has filed all required federal tax returns for the past several years, whether it has any other business affiliations or related entities, and whether it has ever filed for bankruptcy. The IRS also asks about any pending lawsuits or judgments involving the business. This section signals to the IRS whether the business is operationally compliant and whether there are competing creditors or legal risks that could affect collection.
Section 4 — Business Asset and Liability Information
This is the core financial section. The business must disclose every asset it owns: cash on hand and in bank accounts (with account numbers, bank names, and balances), accounts receivable (with aging), inventory (at cost or market), investments, notes receivable, real estate (personal and business, with fair market value, loan balances, and equity), vehicles (make, model, year, mileage, value, loan balance, and equity), machinery and equipment, furniture and fixtures, and any other assets. Every liability must be listed: loans, lines of credit, credit cards, judgments, accounts payable, and payroll taxes due — with creditor names, balances, monthly payments, and collateral pledged.
Section 5 — Business Income and Expenses
The business must report its monthly gross receipts, cost of goods sold, and all operating expenses: rent, utilities, insurance, payroll, taxes, supplies, vehicle expenses, professional fees, interest, depreciation, and other costs. The IRS uses national and local standards for some expense categories and the business's actual documented expenses for others. The goal: calculate the monthly net disposable income — the amount left over after covering allowable operating expenses — that is available to pay the tax debt. Every expense above the allowable standard must be justified with documentation and a business necessity argument.
Section 6 — Calculation of Monthly Net Disposable Income
This section subtracts the total allowable expenses from total monthly income to arrive at the business's net disposable income. This number is multiplied by the number of months remaining in the collection statute (or 12 or 24 months for streamlined agreements) to determine the amount the IRS believes the business can pay. For an offer in compromise, the reasonable collection potential is the sum of net realizable equity in assets plus the future income component (monthly disposable income multiplied by the remaining months). This calculated number is the minimum the IRS will accept — your offer must be at or above this amount, unless special circumstances warrant deviation.
Business Assets — Disclosure, Valuation, and Equity Calculation
The IRS defines business assets broadly and values them at quick sale value — the amount the IRS could realize from a forced sale, typically 80% of fair market value minus any encumbrances. Every asset must be listed, valued, and the equity (fair market value minus outstanding loan balances) calculated. The net realizable equity in business assets is a major component of the reasonable collection potential.
Cash and Bank Accounts
Disclose every business bank account: checking, savings, money market, certificates of deposit, and any cash on hand. Include the bank name, account number, and current balance. The IRS can and will verify these balances through bank records and third-party reporting. Commingling personal and business funds in the same account invites the IRS to treat all deposits as business income and question the legitimacy of every deduction — maintain separate business accounts at all times.
Accounts Receivable
List all outstanding invoices and amounts owed to the business, with an aging schedule (current, 30-60 days, 60-90 days, 90+ days). The IRS generally values receivables at face value minus an allowance for uncollectible accounts. If your receivables are substantial, they can significantly increase your collection potential — the IRS will expect you to collect what is owed before claiming an inability to pay taxes. Provide documentation of collection efforts for aged receivables to support reduced valuations.
Inventory
Report inventory at cost or market value, whichever is lower. Provide an inventory list with quantities, unit costs, and total value. The IRS expects inventory to be converted to cash in the normal course of business, and significant inventory can increase your collection potential. If you have obsolete, damaged, or slow-moving inventory, document the condition and reduced marketability to argue for a lower valuation. If your business uses LIFO, provide both LIFO and current cost valuations.
Equipment, Machinery, Furniture, and Fixtures
List all business equipment, machinery, furniture, and fixtures with descriptions, dates acquired, original costs, accumulated depreciation, and current fair market value. The IRS values these at quick sale value — typically 80% of fair market value for readily saleable items, less for specialized equipment. Encumbered assets have their equity (FMV minus loan balance) counted toward collection potential. Leased equipment is not an asset of the business and should be disclosed as a monthly expense.
Business Real Estate
Disclose all real property owned by the business: the address, description, date acquired, purchase price, current fair market value (supported by a recent appraisal or comparable sales), outstanding mortgage or lien balances, and net equity. The IRS may file a Notice of Federal Tax Lien against business real property, which clouds title and makes it nearly impossible to sell or refinance without satisfying the IRS debt. Real estate equity is often the largest single component of a business's collection potential — protecting it requires a carefully structured resolution.
Vehicles and Mobile Equipment
List every vehicle titled in the business's name: make, model, year, mileage, VIN, date acquired, purchase price, current fair market value (Kelly Blue Book or NADA), loan balance, monthly payment, and equity. Include trucks, vans, delivery vehicles, and any vehicles used by owners or employees. The IRS allows one vehicle per business as a necessary operating expense; additional vehicles may be considered assets with equity that increases collection potential. Vehicles used personally by owners must be allocated between business and personal use.
Business Income and Allowable Expenses
The income and expense section of Form 433-B determines the business's monthly ability to pay. The IRS separates expenses into categories that are allowed based on the business's actual documented costs and those capped by national or local standards. Understanding which expenses are subject to standards — and how to justify expenses that exceed them — is critical to producing a realistic disposable income figure.
Gross Business Income
The IRS wants total monthly business income from all sources: gross receipts from sales and services, interest and dividend income, rental income, and any other revenue streams. If your business has seasonal or fluctuating income, provide a 12-month average — but the IRS may request monthly detail to identify high-revenue months and question whether you can increase payments during those periods. The starting point for income is typically the business's most recent profit and loss statement and bank statements, which the IRS will compare to filed tax returns for consistency.
Cost of Goods Sold
For businesses that sell products, COGS is a direct offset to gross receipts: beginning inventory plus purchases minus ending inventory equals cost of goods sold. The IRS examines COGS carefully — artificially high ending inventory valuations or improperly categorized purchases can inflate apparent profitability. Provide a detailed breakdown of inventory purchases, freight costs, and direct labor to support your COGS calculation.
Payroll and Employee Expenses
Wages, salaries, bonuses, and commissions paid to employees are allowable operating expenses. However, officer compensation is scrutinized: the IRS will compare officer salaries to industry norms and the business's financial condition. Excessive officer compensation — paying yourself above-market wages while the business claims an inability to pay taxes — will be adjusted downward by the IRS, increasing your disposable income. Provide payroll records, Forms W-2, and a justification for officer compensation levels.
Facility and Occupancy Expenses
Rent or mortgage payments on business premises, property insurance, utilities (electricity, gas, water, sewer, trash), property taxes, security, and maintenance costs are allowable. The IRS uses local standards for housing and utilities in many cases. If your facility costs exceed the standard, provide documentation: lease agreement, market comparisons showing your rent is reasonable for the area and property type, and an explanation of why the space is necessary for your business operations. Home office expenses must be allocated and documented using the regular or simplified method.
Operating Expenses and Supplies
Insurance (liability, workers' compensation, business interruption), professional fees (legal, accounting, consulting), office supplies, marketing and advertising, licenses and permits, bank charges, dues and subscriptions, and shipping costs are all allowable if properly documented and reasonable. The IRS expects these expenses to be in line with industry norms — significantly above-average expenses will require justification. Provide invoices, contracts, and a written explanation for any expense category that exceeds typical levels for your industry and revenue size.
Vehicle and Transportation Expenses
Business vehicle expenses — fuel, maintenance and repairs, insurance, registration, and lease or loan payments — are allowable to the extent they support the business. The IRS allows one vehicle per business entity as an ordinary and necessary expense. If the business maintains multiple vehicles, you must demonstrate that each is essential to operations. Provide mileage logs, maintenance records, and for each vehicle, a business necessity statement. Personal use of business vehicles must be allocated — the IRS may impute personal use as officer compensation.
Reasonable Collection Potential — How the IRS Calculates What You Can Pay
Reasonable Collection Potential (RCP) is the formula the IRS uses to determine the minimum amount it will accept to resolve a tax debt. It is not based on what you offer — it is based on what the IRS calculates you can pay. For businesses, RCP has two components: net realizable equity in assets and future income. Understanding this calculation before you submit the 433-B is essential to preparing an offer or payment plan the IRS will approve.
Net Realizable Equity in Assets
The IRS adds up the quick sale value of every business asset (typically 80% of fair market value) and subtracts all encumbrances (loan balances, liens, and priority claims against each asset). The result is the net realizable equity — the amount the IRS believes it could collect if it seized and sold the business's assets. For an Offer in Compromise, this equity amount is the minimum the IRS will accept as the lump sum or short-term deferred offer, regardless of what your monthly disposable income calculation produces. If your business has significant equity in vehicles, equipment, or real estate, the IRS will expect that equity to be liquefied — through sale, refinancing, or borrowing — to pay the tax debt.
Future Income Component
After calculating net monthly disposable income (gross receipts minus allowable operating expenses), the IRS multiplies this figure by the number of months remaining in the collection statute, or by 12 months for a lump sum cash offer, or by 24 months for a periodic payment offer. This future income component represents the amount the IRS believes the business will be able to pay over time from its ongoing operations. If the business is struggling and future income is uncertain or declining, you can argue for a lower multiplier or a hardship deviation — but you must present financial projections, industry trend data, and specific evidence of declining revenue or rising costs to support that argument.
Total Reasonable Collection Potential
RCP = Net Realizable Equity in Assets + Future Income Component. This total is the minimum the IRS will accept in an Offer in Compromise. If your offer is below this amount, it will be returned as unprocessable or rejected, unless you can demonstrate special circumstances — that collection of the full RCP would create economic hardship (the business would not be able to meet basic operating costs), or that compelling public policy or equity considerations warrant acceptance of a lower amount. Special circumstances claims are reviewed by an Offer Specialist and ultimately by an Offer Group Manager — they are not lightly granted and require substantial supporting evidence.
Equity in Assets vs. Future Income — The Strategic Tension
The two components of RCP often pull in opposite directions for business taxpayers. A business with high asset equity but low monthly cash flow (capital-intensive businesses, real estate holding companies, manufacturers) faces a high lump sum demand even though it cannot pay. A business with low asset equity but strong monthly income (service businesses, professional practices, consulting firms) faces a high monthly payment requirement that may not be sustainable over 24 months. The resolution strategy must account for both components: can you restructure debt to reduce equity in assets? Can you document declining revenue to reduce the future income multiplier? An experienced collections professional will build a strategy that addresses both sides of the RCP equation before the 433-B is submitted.
Special Considerations — Trust Fund Taxes and In-Business Trust Fund Cases
Certain business tax debts carry special collection treatment because they involve trust fund taxes — money the business withheld from employees or customers and held in trust for the U.S. government. Trust fund taxes are never dischargeable in bankruptcy, are subject to the Trust Fund Recovery Penalty (TFRP) against responsible individuals, and receive priority treatment in all collection actions. Publication 433-B and Form 433-B account for these cases, and the IRS pursues them with heightened intensity.
What Are Trust Fund Taxes?
Trust fund taxes are taxes the business collects or withholds from third parties and holds in trust for the IRS. The primary examples are: (1) federal income tax withheld from employee wages, (2) the employee's share of Social Security and Medicare taxes (FICA) withheld from wages, and (3) certain excise taxes collected from customers. These are NOT the business's money — they belong to the employees or customers, and the business is merely a conduit. The employer's matching share of FICA is NOT a trust fund tax and can be discharged in certain circumstances, but the withheld portion is inescapable.
Trust Fund Recovery Penalty (TFRP) — Personal Liability
Under IRC Section 6672, the IRS can assess a penalty equal to 100% of the unpaid trust fund taxes against any person who is responsible for collecting, accounting for, or paying over trust fund taxes and who willfully fails to do so. This penalty is a personal liability — it pierces the corporate veil and attaches to the individual's personal assets, wages, and future tax refunds. The IRS conducts a Form 4180 interview with each potentially responsible person to determine willfulness and responsibility. Being a corporate officer, having check-signing authority, making decisions about which creditors to pay, and knowing the taxes were unpaid are all factors that establish responsibility.
In-Business Trust Fund Cases — Special Scrutiny
An in-business trust fund case is one where the business is still operating but has accumulated unpaid trust fund taxes. The IRS treats these as the highest collection priority because the business continues to accrue new trust fund liabilities with every payroll cycle — the hole gets deeper every month. In in-business cases, the IRS may: require the business to file and pay all current employment taxes on time as a condition of any collection alternative; mandate that the business make federal tax deposits on a next-day basis instead of the normal semi-weekly or monthly schedule; require the posting of a bond; and demand that the business provide proof of current compliance before processing an offer or installment agreement. Failure to stay current on employment tax deposits during the pendency of a collection alternative automatically defaults the agreement.
Form 4180 — The Trust Fund Interview
Before assessing the TFRP, a Revenue Officer will conduct a Form 4180 interview with each individual identified as potentially responsible. The Form 4180 asks detailed questions about the person's role, duties, knowledge of the unpaid taxes, authority to pay bills and sign checks, and the business's internal financial decision-making process. The interview is investigatory and the responses are used to build the case for the penalty assessment. Anyone called for a Form 4180 interview should be represented by a tax professional — the interview is not an opportunity to explain your side informally; it is an evidence-gathering exercise that will determine whether a penalty equal to 100% of the unpaid trust fund taxes is assessed against you personally. Do not attend this interview alone.
Trust Fund Designation of Payments
When a business makes a partial payment toward its employment tax liability, the IRS will apply the payment in the way most advantageous to the government unless the taxpayer designates how the payment should be applied. By default, payments are applied to the non-trust-fund portion (employer's matching share) first, leaving the trust fund portion (employee's withheld taxes) outstanding — which maximizes the amount subject to the TFRP. However, you can designate in writing that payments be applied to the trust fund portion first, reducing the penalty base. This designation must be made at the time of payment and accompanied by clear written instructions. A tax professional can ensure every payment reduces your personal exposure to the maximum extent allowed.
Bankruptcy and Trust Fund Taxes
Trust fund taxes are priority, non-dischargeable debts under Section 507(a)(8) and Section 523(a)(1)(A) of the Bankruptcy Code. No chapter of bankruptcy — Chapter 7, 11, or 13 — discharges trust fund taxes. The TFRP, once assessed, is likewise non-dischargeable. The business's bankruptcy filing does not stay the IRS's ability to assess the TFRP against responsible individuals — the automatic stay protects the business entity, not its officers and owners personally. If your business is considering bankruptcy to deal with tax debt, you must understand that trust fund taxes will survive and that the individuals who were responsible will remain personally liable regardless of the business's discharge.
Practical Strategies — Preparing a Form 433-B the IRS Will Accept
The 433-B is a negotiation document, not just a financial statement. Every number you report creates a fact the IRS will rely on. Mistakes — overstating income, understating expenses, omitting assets, or providing inconsistent figures across sections — can destroy credibility and result in rejection of your collection alternative. A carefully prepared 433-B should be consistent with filed tax returns, supported by bank statements and financial records, and accompanied by a narrative explaining any unusual items or circumstances.
Verify Consistency With Tax Returns
The single most common mistake on Form 433-B is inconsistency with filed tax returns. If your 2024 corporate return reported $500,000 of gross receipts and your 433-B reports $300,000, the IRS will reject the financial statement and demand an explanation — and may refer the discrepancy for examination. Before submitting the 433-B, compare every income and expense line to the most recent filed return. If there are legitimate differences (the current year is genuinely lower, the business has lost a major client, a contract expired), document them with specific evidence: current profit and loss statements, lost-customer letters, and market analysis. Unexplained discrepancies will be resolved in the IRS's favor.
Document Every Expense That Exceeds Standards
The IRS applies Allowable Living Expense (ALE) standards to certain business expense categories. If your actual rent, vehicle expense, or other categories exceed the standard, you must provide: the lease, mortgage, or loan agreement; three to six months of canceled checks or bank statements showing the payments; a written justification of why the expense is necessary for the business's continued operation; and, if possible, comparable market data showing the expense is reasonable. Expenses that exceed standards without documentation will be disallowed and the difference added to disposable income.
Asset Valuations — Support With Evidence
Every asset value reported on the 433-B should be supported. For real estate, provide a recent comparative market analysis or appraisal. For vehicles, include a Kelly Blue Book or NADA printout. For equipment, provide a depreciation schedule and, for high-value items, a dealer quote or auction estimate. For inventory, provide a detailed listing with cost basis. Guessing or rounding asset values upward increases your collection potential unnecessarily; undervaluing assets can be treated as concealment. Accurate, documented valuations build credibility and protect your resolution.
Address Dissipated Assets Carefully
If the business sold, transferred, or otherwise disposed of assets in the years leading up to the 433-B filing for less than fair market value, the IRS may treat the value of those assets as dissipated and add it back to your collection potential. This is especially common when business owners transfer assets to related parties, sell equipment to friends at below-market prices, or distribute assets to owners before seeking a collection alternative. If you transferred assets, disclose them and explain the circumstances. If the proceeds were used to pay legitimate business expenses or other creditors, document every dollar of the disposition. Undisclosed asset transfers discovered by the IRS through public records or third-party reporting can result in rejection of your resolution and potential referral for fraud investigation.
Present the Narrative
The 433-B is a form with numbers, but it is also a story about your business. Attach a written narrative that explains: why the business fell behind on its taxes (a specific business reversal, not a general statement of hardship); what has changed so the problem will not recur; what steps the business has taken to reduce expenses and increase revenue; and why the proposed resolution amount is the most the business can pay while continuing to operate and remain compliant going forward. The narrative humanizes the numbers and gives the Offer Specialist a basis to recommend acceptance. A persuasive narrative, supported by the financial data on the form, is often the difference between acceptance and rejection for borderline cases.
Your Business Owes the IRS — We Know How to Negotiate for Less
The 433-B is the single most important financial document your business will submit to the IRS. Our CPA-led team has prepared hundreds of Collection Information Statements and negotiated business Offers in Compromise, installment agreements, and CNC determinations. We know how to value assets, document expenses, justify deviations from standards, and build a financial narrative that the IRS will accept — at the lowest amount the business can realistically pay. Whether you are facing a Revenue Officer, want to protect your business from levy and seizure, or need to settle a trust fund tax liability and protect responsible individuals from the Trust Fund Recovery Penalty, we will build the strongest possible case and advocate aggressively for your business. Do not submit the 433-B without professional representation — the numbers you report become facts the IRS will use against you, and once submitted, they cannot be easily changed.